Europe Must Move Quickly in the Wake of S&P Downgrades: Merkel

German Chancellor and Christian Democratic Party (CDU) leader Angela Merkel gestures as she addresses the media during a party convention in Kiel on Saturday. Photo: REUTERS

Credit-rating downgrades in the Eurozone by Standard & Poor's underline why Europe must seal a pact to tighten fiscal rules quickly and get its permanent bailout fund up and running as soon as possible, German Chancellor Angela Merkel said on Saturday.

We are now challenged to implement the fiscal compact even quicker ... and to do it resolutely, not to try to soften it, she said at a meeting of conservatives in the northern city of Kiel. We will also work particularly to implement the permanent stability mechanism, the [European Stability Mechanism], so soon as possible -- this is important regarding investor trust.

S&P on Friday downgraded the credit ratings of nine of the 17 Eurozone countries. Germany kept its AAA rating, while France and Austria lost theirs.

The S&P move was not a surprise, Merkel said.

It is one of three ratings agencies, she added. We have taken it into account. It did not surprise us completely, given the discussion in the past weeks.

Turning to Europe's current bailout fund, the European Financial Stability Facility, Merkel said that the downgrade should not affect its operation.

The necessary tasks that the EFSF must fulfill in the coming months, I very much believe, can be fulfilled with the current methods.

The interest rates for the acceptance of certain bonds had already risen a bit anyway -- the work of the EFSF will not be torpedoed. I see no need to change anything regarding the EFSF.